Here's Why The Kremlin HAD To Fire Mayor Luzhkov

Longtime Moscow Mayor Yuri Luzhkov was fired on Sept. 28 by
Russian President Dmitri Medvedev after an 18-year tenure as the
mayor of Russia’s capital. The presidential decree firing Luzhkov
cited Medvedev’s “loss of trust” in the mayor as the reason for
the dismissal, words usually reserved by the Russian government
for the most egregious offenses. Luzhkov has also been removed
from his leadership position in the United Russia party, the
ruling party in Russia that he helped found and run.

In power since 1992, Luzhkov was one of the last remaining relevant Yeltsin-era political
figures in Russia. His ouster, however, has been in the
works for several years and is a product of a consensus at the
top of Russia’s political leadership. According to STRATFOR
sources in Moscow and contrary to initial reports from the
mainstream media, Russian President Dmitri Medvedev, who has led
the public criticism of Luzhkov in recent months, and Russian
Prime Minister Vladimir Putin are in agreement on the firing.
Luzhkov’s sacking is a sign that the Kremlin does not believe it
must depend on a single man to control organized crime in the
city. But concerns remain that Luzhkov’s wife, a construction
magnate in Russia, will be able to strike back at the Kremlin by
delaying projects needed for the 2014 Winter Olympics in Sochi.

One of Putin’s first efforts to consolidate the Kremlin’s control
over Russia in the early 2000s was going after the Yeltsin-era
oligarchs and regional governors who had amassed inordinate power
after the fall of the Soviet Union when the central government
was weak. But as Putin took on various independent governors one
by one, it was the region home to the Kremlin — Moscow itself —
that remained out of Putin’s reach. This is not only because
Luzhkov recognized early on that Putin would not be the kind of
weak central leader Russia had become accustomed to in the 1990s
— despite himself harboring designs in the 1990s to replace Boris
Yeltsin — but also because he had built his own fiefdom in Moscow
that was impossible to dislodge.

The key factor of Luzhkov’s control of Moscow — and one that is
rarely mentioned openly in Russia — is his alleged link to the
Moscow Mob, the most powerful Russian organized crime syndicate.
Luzhkov’s alleged association with the Moscow
Mob is neither one of direct control nor of criminal
association, and he is not involved with the operations of the
Moscow Mob himself; rather, he is widely perceived to be the
group’s political handler. Luzhkov has held on to an alleged
“shadow portfolio” of overseeing the political aspects of the
Moscow Mob’s operations. This means that he has been a central
figure in synchronizing the day-to-day operations of Moscow’s
underworld — particularly via his wife’s business interests in
the largely organized crime-controlled construction
business — with the interests of the state. Because the
Moscow Mob is such an important part of Russia’s ubiquitous shadow
economy — and therefore state power — and because of
Luzhkov’s uncanny ability to influence the syndicate, he has been
essentially untouchable. He has also made himself useful to the
Kremlin by delivering votes in Moscow for candidates loyal to the
Kremlin.

The alleged business associations with the Moscow Mob have
brought massive political and financial success to Luzhkov and
his wife, Elena Baturina, Russia’s only female oligarch and
according to Forbes the third-richest self-made woman in the
world. However, over the last decade Putin has sought to
consolidate control over all levers of power in Russia, including
organized crime. As such, Luzhkov’s personal control of the
Moscow Mob had become a liability rather than a benefit, since it
concentrates an important part of Russia’s economy in the hands
of a single man — or rather a single couple.

The Kremlin had therefore decided in late 2009 and early 2010 to
depersonalize the alleged connection between Luzhkov and the Moscow Mob and instead
create a sort of permanent institutional “shadow portfolio”
within the Moscow mayoralty that would function as a political
handler for organized crime as Luzhkov allegedly did, essentially
preserving the state’s links to the Moscow Mob but ditching
Luzhkov. Firing Luzhkov was the linchpin of the plan.

Commentators and media reports have speculated that Putin’s
reticence to speak out over the Medvedev-Luzhkov feud is a sign
of an emerging split between Medvedev and Putin. This is far from
reality. Putin has long hoped to get rid of Luzhkov but has
been concerned about a loss of control over Moscow’s organized
crime or that Luzhkov would use his alleged ties to organized
crime to retaliate. Furthermore, Luzhkov’s high profile and
political loyalty was also an impediment to the ousting in the
past, although his ability to deliver Moscow votes for
pro-Kremlin parties has slipped markedly in recent years.

On the day of the firing, Putin even expressed his support for
the method of ousting Luzhkov via presidential decree, saying he
himself had passed the law allowing the president to install or
remove a subordinate official and that Medvedev acted in strict
according with the law. Medvedev’s leading role in the feud is
useful for Putin to distance himself from the political fray of
taking on Luzhkov. It was also designed to build up Medvedev’s
credibility as a strong leader who can stand on his own. This is
an important element of the Kremlin’s ongoing efforts to create a
perception that Medvedev and Putin are independent political
actors and potential ideological opposites — if not opponents —
to illustrate Russia’s emergence as an advanced and mature
democracy.

The fact that Medvedev and Putin are comfortable with Luzhkov’s
sacking illustrates the extent to which the Kremlin believes it
no longer has to depend on a single man to control Moscow’s
powerful organized criminal elements and that it can instead
create institutional controls to guarantee loyalty to the state
in the future. But one issue outside of the Kremlin’s control may
still remain — the 2014 Sochi Olympics and Luzhkov’s role in the
project.

The Sochi Olympics are widely seen as Moscow’s coming out party.
But construction is behind schedule and the Kremlin could face
serious global embarrassment if it does not complete all the
projects on time. Luzhkov and his wife are in charge of the
entire Sochi construction effort and it remains to be seen
whether Luzhkov will retaliate against the Kremlin by delaying or
otherwise hindering the Olympic construction effort.

*This report is reprinted with permission of STRATFOR. It may not
be reprinted by any other party without express permission of
STRATFOR.